“For Cause” Termination Of Contract Employees

In the past I’ve discussed Iowa’s at-will employment rule. Under that law, an employee can be fired at any time for any reason without warning. But what about employees who have an employment contract and are thus not necessarily considered at-will? Under what circumstances can a contract employee be fired?

Courts will always first look to the language the parties have included in their contract. Some employment contracts include a termination section that basically states that either party has the right to terminate the employment relationship at-will, same as the general rule I summarized above. Other contracts may delineate specific circumstances under which a person can be discharged and limit the employer’s right to fire to those circumstances. Some employment contracts though are utterly silent in this regard. So what’s the default rule for termination of a contract employee when the contract contains no language governing termination?

A contract of employment which by its express terms is for a definite time or to last until a definite day presents no problem concerning its duration and termination but will be less clear if it does not have a termination rights section. In that case the employer will still have the implied right to discharge the employee for cause, but otherwise the employment cannot be terminated of right during the term of its existence as expressed in the contract. An employee under a “for cause” contract may be terminated for reasons that relate to ‘performance of his or her job and the impact of that performance on an employer’s ability to attain its reasonable goals. “Cause” does not include reasons that are arbitrary or unfair. In such a case it’ll be up to a judge or a jury to decide whether the employer fired an employee “for cause,” and is therefore not liable, or whether the employer did not have cause, in which case it could not legally discharge the employee.